Outsourcing is a business practice in which a company hires a third-party to perform
tasks, handle operations or provide services for a company. (Tech) Offshore Outsourcing
is when an organization recruits a third-party supplier to conduct operations from an
outside country. Outsourcing and offshore outsourcing are trending and increasing at 20
to 25% annually for many different reasons, such as customer service, IT, payroll,
account payable or production of goods.
There are many benefits and risk associated with outsourcing whether onshore, nearshore,
or offshore. Many companies outsource to be more efficient, complete task quickly, the
skill set, or expertise needed for a job not available in-house and to lower costs. b Having
such benefits, a company can focus more on core competencies and business and or
utilize the cost savings on new projects or current projects that may a higher yield in
comparison to the function outsourced. The risk associated with offshore outsourcing, a
company must stay in constant contact with the third-party and manage the relationship to
ensure success. A company can lose control over the function outsourced. Or have
difficulty acquiring all data needed if the function or outsourcing needs to be reversed. A
company should always have an exit plan in place. Another potential risk is security or
the improper handling of confidential and private data. No process in place to protect
data with encryption, proper employee training or controlled access. A company must
hold the offshore third-party provider at a high standard when it come to safeguarding
their client’s information or other data. The breach or leak of such information can
weaken a company’s reputation.
A company’s duty and responsibility in protecting to the best of its ability should be a
high priority whether the function is being handled in-house or outsourced. This could
save company millions or even billions of dollars in lawsuits. If offshore outsourcing is
utilized, the company should make sure the provider operates in good faith as if the
company were providing the service. The provider should use every avenue available to
protect the clients data, data masking, data loss prevention software and encryption to
name a few.
Romney, M. B., Steinbart, P. J., Summers, S. L., & Wood, D. A. (2020). Accounting
Information Systems (15th ed.). Pearson Education (US).
Outsourcing: Retrieved Dec 8, 2022.
https://www.techtarget.com/searchcio/definition/outsourcing#:~:text=Outsourcing%20is%
20a%20business%20practice,provide%20services%20for%20the%20company.
